{"id":79,"date":"2026-10-12T11:14:22","date_gmt":"2026-10-12T11:14:22","guid":{"rendered":"https:\/\/fxcapitalindia.in\/blog\/?p=79"},"modified":"2026-10-12T11:15:00","modified_gmt":"2026-10-12T11:15:00","slug":"your-expansion-is-on-a-9-loan-your-own-cash-is-doing-a-5-5-job","status":"publish","type":"post","link":"https:\/\/fxcapitalindia.in\/blog\/?p=79","title":{"rendered":"Your Expansion Is on a 9% Loan. Your Own Cash Is Doing a 5.5% Job."},"content":{"rendered":"\n

Exports were growing. The banker was pleased that the limits were hardly used. And every month, the project EMI left the current account, and the export business quietly paid what the project could not.<\/h3>\n\n\n\n\n\n
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Exports were growing. The banker was pleased that the limits were hardly used. And every month, the project EMI left the current account, and the export business quietly paid what the project could not.<\/p>\n\n

That was the picture at the first exporter in this series.<\/p>\n\n\n

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\u20b944 crore of post-shipment working capital is funded with owners’ money, while the project runs on term loans at 9%.<\/p>\n

Post-shipment credit costs 5.25% after subvention (8% less 2.75%). Let the bank fund \u20b936 crore, the amount the subvention cap covers, and use that cash to repay term loans. The group saves \u20b92.8\u20133.5 crore a year, including the forward premium on its euro bills.<\/p>\n<\/div>\n\n

The situation<\/h2>\n\n

The group has two companies, each with its own IEC and GST registration. Together they sell about \u20b9135 crore a year, mostly exports in euros, all on 120-day credit.<\/p>\n\n

A few years ago the group invested about \u20b9100 crore in a new project, \u20b980 crore of it from banks. About \u20b953 crore is still outstanding. The EMI is about \u20b91.66 crore a month. The project brings in about \u20b91 crore a month.<\/p>\n\n

That leaves a gap of \u20b966 lakh every month<\/strong>, which the export business pays.<\/p>\n\n

At the same time, about \u20b928 crore of sanctioned export credit limits were completely unused. The group was financing its entire export cycle from its own pocket.<\/p>\n\n

How it happens<\/h2>\n\n

It starts with success. Exports do well and cash builds up. The owners use it to buy raw material and to carry buyers for 120 days. Not drawing on bank limits feels prudent.<\/p>\n\n

By the time the project comes along, the cash is already inside the export cycle:<\/p>\n\n